Hedge funds have made notable adjustments to their portfolios, particularly within the "Magnificent 7" stocks, according to recent data from Jefferies.
While the overall weight of the top 16 stocks, dubbed the "Sweet 16," saw minimal change, individual stocks experienced significant shifts.
Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT) are said to have emerged as the biggest beneficiaries, with hedge funds increasing their weightings in these two tech giants by 3.8% and 2%, respectively.
This increase in exposure reflects a growing confidence in these companies' ability to drive future growth, especially as Amazon continues to expand its cloud computing dominance and Microsoft leverages its strong position in AI, enterprise software, and cloud services.
Conversely, Netflix (NASDAQ:NFLX) and Meta Platforms (NASDAQ:META) saw reductions in their portfolio weightings, with Netflix being cut by 2.9% and Meta by 2.4%. This shift indicates a cautious approach towards these two companies.
Jefferies also highlighted a broader trend where hedge funds are reducing their exposure to secular growth stocks, which now account for 49.5% of their portfolios, down from 54.5% at the end of April.
This reduction was primarily redirected into cyclical stocks, which saw their weightings increase by 4.8% to 52.5%, reflecting a shift towards sectors that are more sensitive to economic cycles.
"These investors are still OW Secular Growth by over 9%. All of the trim to Secular Growth went to the Cyclicals, as its weight was boosted by 4.8% to 52.5%," explained the firm. "Hedge Funds are now OW this group by 3.7% after being slightly UW a month prior. The Bond Proxies are still held net short, just by a smaller margin at -1.9%."
Overall, hedge funds are recalibrating their positions within the tech sector, favoring Amazon and Microsoft while trimming stakes in Netflix and Meta, amidst a broader move from secular growth to cyclicals.